VIDEO: Buckle Up for a Busy Week of Economic Data and Earnings

In today’s Daily Rundown video, Chris Versace discusses the agenda for the coming week, including key economic data reports. 

He also explains why we’ll be paying attention to earnings from Walmart WMT and portfolio holding Applied Materials AMAT, and which two portfolio holdings received bullish price targets from Jefferies.

Transcript

CHRIS VERSACE: Hey, folks. Chris Versace here. Monday, May 13. And buckle up. It is going to be a busy week. We've got a barrage of economic data, almost a dozen Fed speakers, and a continued flow of quarterly earnings reports. So let's get to it.

On the economic front, the April PPI, CPI, retail sales, and housing starts-- a lot of that is going to go into reassessing the pace of inflation, the strength of the economy, and potentially an impact on consumer spending. When it comes to what the market's really focused in on, there's two things. What's the strength of the economy? Does it support the continued narrative of earnings growth? And second, is inflation starting to come down so the market can start to think about when the Fed might start cutting interest rates?

A quick look at the CME FedWatch tool says the market continues to expect a September rate cut. But as you know, given the data that we saw in the April PMI report from ISM, particularly prices paid, we don't see that in the cards. We also doubt a September rate cut just given the proximity to the presidential election.

But again, we will continue to update our thinking as fresh data becomes available that is why we'll be tuning into both the April PPI report and CPI report this week. Should we see the April core CPI report break out of that 3.8% to 4% range it's been trapped over the last few months, the market will take that as a positive sign. But we have to remember that 3.5%, 3.6%, something like that-- still a big, big distance to the Fed's 2% target.

We will want to pay attention to the PPI report as well. And remember, it comes a day earlier than the CPI report this time around. And given the relationship between PPI to CPI, PPI leads CPI by several months. If we see the PPI data for April come in a little warmer than expected, odds are we'll see some rejiggering in what the market expects for the April headline CPI, as well as the core CPI.

But again, we'll be breaking all that down. We'll be listening to what the Fed heads have to say this week about that and jiggering our expectations for rate cuts along the way.

We will also get the April retail sales report. This should be an interesting one. We've been reading a lot about lower income Americans starting to trade down, and we are looking for some ideas on that for the bullpen. Potentially in the portfolio. The problem is, the retail sales report doesn't really have any line items for that type of thing.

But again, we'll take it as a read on overall consumer spending, and we'll be digging into the various line items that it does report as it relates to some of our holdings, including Amazon, Costco, and of course PepsiCo.

Wheeling over to the April housing starts report, you know we'll be focused far more on single family. If we see a pickup in that, that could be a positive indication for that type of activity, only reinforcing our bullish stance on United Reynolds and Vulcan Materials. But as you know too, we do have DR Horton as well as Builders FirstSource in the bullpen. So we will chew through that data as well.

Just anecdotally, we are hearing that with the continued increase in rents that some folks are just saying, you know what? I understand mortgage rates are higher. I need to bite the bullet and I need to start moving, so to speak. But again, we'll continue to chew through that hard data and make some decisions later in the week as we get it.

As we step back and think about all that data, we're also going to want to pay attention to the Atlanta Fed GDPNow model. When it was last updated, that rolling forecast hit 4.2% for the current quarter. That's up considerably from the initial print of 1.6% for the first quarter of 2024.

Now, a couple of thoughts on this. One, that 1.6% print is likely to get revised higher as some later economic data gets incorporated into the calculations. But as it relates to the current quarter GDP print of 4.2%, yes, it says the economy is performing better than expected. But we also know that we're going to get a sea of data between now and when the 2Q GDP print comes out-- both for the initial print and then the subsequent revisions as well.

So I wouldn't get overly comfortable with that 4.2% print. The key here is going to be, though, whether or not the economy continues to grow above trend. Calling it that above 2%. If we continue to see that and it supports the notion that companies can continue to deliver vibrant earnings growth, then that will support the current market narrative.

If, however, the oncoming revisions of the Atlanta Fed GDP model start to force the figure below that 2% level, that's when people will start to get a little bit nervous. But that could also goose expectations for rate cuts. So there's a lot of back and forth that we're going to have to watch triangulating. Not only the inflation data, but the larger data about the speed of the overall economy.

Again, we'll be doing all of that this week with this sea of data, and we will be circling back to what the Fed officials have to say as that data is said, especially with Fed Chair Powell has to say on Tuesday.

Now there are some other things I want to talk about. We do have some earnings this week that will be important for us, as well as another event. That event is Google's I/O event. This is where they showcase a number of different products and services they'll be bringing to market.

I expect it will be heavy on-- yep, that's right-- AI, data center, and cloud. So that would be very positive for our shares of Marvell and Nvidia. I would also throw quarterly results from Cisco into that grouping as well.

We also have earnings this week from Walmart and Home Depot. We will be using those as a read on the consumer and consumer spending, especially Walmart, because that's where we'll start to listen for signs about the consumer trading down private label brands or just looking for more value.

And then finally, we have quarterly results this week from portfolio holding Applied Materials. We do expect a positive report. We expect to hear comments about rising backlog. Strong order flow. But we also expect it to paint a very nice picture about the benefits tied to flowing funds for the CHIPS Act. But also increasing semiconductor capital capacity in the eurozone and in Japan as well.

The one wild card will be what they say about China. But we will be listening for that. And remember, Applied Materials is one of those positions that it's on our shopping list. And if we see it pull back or we see a even stronger than expected guide from the company, one of those could be a catalyst to add some additional Applied Materials shares to the portfolio.

And I want to close out just on one final note. This morning, Jefferies initiated coverage on shares of Nvidia with a $1,200 price target and Marvell with an $85 price target. Look, they're probably seeing the same things that we're seeing. We'll parse the reports and have some follow-up comments to you if there's anything different.

But, look. The continued ramp in AI adoption, data center spending bodes very well for both of them. And as we've said before, we think we're going to see an acceleration in the network and carrier infrastructure business from Marvell as we move into the second half of the year and beyond. So we remain bullish on both of those names.

And that is today's video, folks. Thanks for watching. Please be sure-- check your emails. Check your alerts. We want you to be in sync with our latest thinking, and also if we make any moves with the portfolio. Have a great day.

At the time of publication, TheStreet Pro Portfolio was long AMAT.